8/13/2019 WFMI

1/7

Company Information

Whole Foods Market is categorized in the grocery store industry. This grocery

store was founded in 1978 and is headquartered in Austin, Texas. There are several core

values that they believe in as a company. These core values include; selling the highest

quality natural and organic products available, satisfying and delighting our customers,

supporting team member happiness and excellence, creating wealth through profits and

growth, caring about our communities and our environment and creating ongoing win-

win partnerships with our suppliers. Their central focus is the ownership and operation

of natural and organic food supermarkets. The business offers products that include

seafood, meat and poultry, bakery items, prepared foods and catering, coffee and tea,

nutritional supplements and vitamins.

Along with that they also provide specialty products like beer, wine, cheese,

body-care products and educational books, floral, pet and household products. By

September of 2009, the company was operating 284 stores and of those stores 273 were

located within the United States. Although an intraday performance summary showed

that the grocery store industry had decreased about .64%, the Whole Foods Market

managed to stay green and increase about .28%.

Although Whole Foods started as an all natural food store and has continued to

stay within that scope no matter how the industry has fluctuated over the years. Whole

Foods is without a doubt a defensive company. They sell what some consumer may see

as premium food items but due to the fact that they are food products they will still be a

necessity every day of the year and even during downturns in the economy. The feeling

about Whole Foods as a company is that it is in great shape to move forward and take

8/13/2019 WFMI

2/7

advantage of the recovering economy. Now is the time that people will start to spend

more money on better quality necessity items which will bring consumers into the Whole

Foods stores and help the company to prosper.

Industry Analysis

The Super market and Grocery store industry is in the mature stage of the industry

life cycle. This industry experienced an increase in revenue in 2007 and 2008. In 2009 at

the height of the recession the industry experienced a small decrease in revenue. The

industry is expected to experience a decrease in overall revenue in the next three years

due to increasing transportation and utilities expenses.

The Supermarket and grocery store industry has all the characteristics of being a

highly competitive industry. It has a low level of concentration meaning that there are

many firms each with a small share of the market. The industry is saturated with many

small firms offering the same or very similar products. During the recession many firms

such as Kroger took advantage of the situation and increased their market share by

buying out competitors. Many small businesses with less than 5 employees have been

fading out in the past five years. This trend is expected to continue over the next three

years.

The Kroger Co. has the biggest share of the market with 15.5%, Safeway Inc. has

8% and Supervalu Inc. has 6.5%. These are the three biggest competitors in the industry

but the other 70% is made up of smaller, niche companies. Whole Foods has a 1.5%

market share of the industry. Their share of the market is expected to grow in the next

five years because of the growth of their niche product line of organic and natural foods.

8/13/2019 WFMI

3/7

Whole Foods Market vs. SPY 500, Retail Foods Industry, & KrogerDecember 31, 2008 - January 4, 2010 - % of Growth

-50

0

50

100

150

200

250

300

Percentage

WFMI

SPY 500

RFI

KR

The retail food industry is affected by external competition from warehouses such

as Costco and Sams Club. They also compete with supercenters like Walmart and

Kmart. These companies do not specialize in the sale of food but they use economies of

scale to provide cheaper products.

The level of regulation in the retail food industry is light and the trend is steady.

There are not many regulations for companies to deal with. There is the Sherman

Antitrust Act, banning companies from cutting prices drastically intentionally driving out

competitors. The industry is also lightly regulated by the Food and Drug Administration

and the US Department of Agriculture.

Recent Stock Performance (January 2009 October 2010)

In 2009, Whole Foods Market Inc. had a substantial increase in earnings for those

who chose to invest in the company. On December 31, 2008, Whole Foods Market Inc.

stock price closed at $9.44, and by January 4, 2010 the stock price had risen to $27.85.

In short, Whole

Foods Market

Inc. had a 195

percent rate of

return over 2009.

While this

statistic is

impressive,

Whole Foods as

8/13/2019 WFMI

4/7

of August 2008 suspended their quarterly dividends to their shareholders. Up until this

date Whole Foods had given quarterly dividends since January 2004. However, the

company just recently announced that they will be resuming their quarterly dividends as

of January 2011. This bodes well for future investors assuming Whole Foods will still

increase their return on investments.

The overall market improved dramatically throughout 2009 having a rate of return

of 170 percent respectively, and it is obvious Whole Foods stock was profitable as

shown by its rate of return. When compared to the market of stocks in Thomson

Baseline, Whole Foods Market Inc. stock had a relative strength of 91 meaning Whole

Foods out performed all but 9 percent of the stock market in 2009.

In 2009, the S&P 500 also improved their rate of return by 26 percent and had a

relative strength of 44 when compared to the market. This indicates that the S&P

improved significantly, but did not have quite the success as Whole Foods during the

year. When comparing these two stocks one has to take into account that the S&P 500

factors in more than one stock just as needs to be done when comparing to the entire

market. If one company in the S&P has a dramatic gain or loss it will affect the entire

stock causing it to rise and fall in price as such. Thus, to know how Whole Foods

performed the company needs to be compared the industry it is in and even to a specific

competitor also in the market.

As a whole, retail food industry did not perform well. In 2009, the retail food

industry had a rate of return of negative 8 percent. When Whole Foods is compared to

the industry it is simple, there is no comparison. Whole Foods had a fantastic year in the

market as the industry suffered.

8/13/2019 WFMI

5/7

The main competitor in the industry to Whole Foods is Kroger. In 2009, Kroger

stock did even worse than the industry. The rate of return for Kroger was negative 22

percent. When compared to Whole Foods this is staggering considering Whole Foods

rate of return of 195 percent. Kroger while still a larger company in the market suffered

in the current state of the economy. Their relative strength was 14 meaning they did not

even outperform one-fifth of the market while Whole Foods outperformed over 90

percent. All these numbers have shown that in 2009 Whole Foods stock outperformed

the market, S&P 500, retail food industry, and a close competitor.

Whole Foods Market Inc. stock did not experience many, if any, problems in

2009. Their stock grew

substantially for most of the

year. However, there is one

comparison that can be

made. For the most part

Whole Foods stock price

increased and decreased as

did the national

unemployment rate. From January through mid February Whole Foods stock held

somewhat steady around $9.50. As unemployment rate grew significantly in the

upcoming months so did Whole Foods stock, increasing in stock price from $9.29 to

$22.44 in less than 3 months.

The unemployment rate dropped from June to July and so did the price for Whole

Foods stock. On June 15, Whole Foods stock price began to drop from its $20.44 price.

U.S. Unemployment Rates

Jan 2009 - Jan 2010

4

5

6

7

8

9

10

11

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Pe

rcentage

Unemployment Rate

8/13/2019 WFMI

6/7

It dropped to $17.18 on July 7, its lowest point since such a substantial increase. Just as

unemployment went up again in the following months, Whole Foods price reached its

highest point. In October, the month of highest unemployment, Whole Foods stock

reached its high point of the year of $34.19. Then again unemployment rates decreased

and so did Whole Foods stock. When unemployment decreased the stock went from

$32.06 to $27.10 in one day. From that point Whole Foods stock fluctuated slightly but

held at about $27 per share from the rest of the year. As a side note, and shown in the

graph, unemployment rates held steady.

In 2010, Whole Foods Inc. stock has continued to grow dramatically. Since

beginning at $18.19 on January 4, the stock today is at $45.64. This is over 250%

increase in stock price. This increase is partially due to the fact that Whole Foods

premium food products are beginning to turn into more revenues with the economy

making improvements and the fact they are also a defensive company. People are

beginning to spend their money on not just items of necessity but also items they

wouldnt ordinarily buy in the down economy. This is an advantage forthe retail food

industry in general.

Expect Whole Foods Stock to continue to grow over the next few months barring

a disaster in the national economy. As the economy continues to improve Whole Foods

stock will as well. According to Baseline, the current beta for Whole Foods stock is 1.14

indicating their stock flows with the market. In short, as long as the market continues to

improve Whole Foods will as well creating even larger profits for investors. But if the

market begins to fall watch this stock very closely because chances are its price will fall

as well.

8/13/2019 WFMI

7/7

At this moment, Whole Foods stock is bullish indicating that most believe its

stock will rise in the near future as the economy has been improving. Whole Foods stock

can be considered safe within the market and their particular industry. Their current

leverage of 1.8 when compared to the rest of their industry has much less risk than that of

Kroger (4.3), Supervalu (6.0), and Safeway (2.7) making Whole Foods a worthwhile

investment.